A writer must “know and have an ever-present consciousness that this world is a world of fools and rogues… tormented with envy, consumed with vanity; selfish, false, cruel, cursed with illusions… He should free himself of all doctrines, theories, etiquettes, politics…” —Ambrose Bierce (1842-1914?). “The nobility of the writer's occupation lies in resisting oppression, thus in accepting isolation” —Albert Camus (1913-1960). “What are you gonna do” —Bertha Brown (1895-1987).

Tuesday, January 5, 2016

“…Pensions are bankrupting our state and crowding out our
ability to fund safety net programs for the developmentally disabled or fund
education with more state dollars in place of ever increasing property taxes.
Without pension reform our state will continue to decline as unfunded...
liabilities are expected to continue to climb until 2030 and the amount of
general revenue dollars going to these unsustainable funds will climb with it” –Rep.
Jeanne Ives.

Why are there unfunded liabilities, Jeanne Ives? In other
words, why are you blaming public employees and retirees once again for what
you and other politicians have done and continue to do through your carnival of deceitfulness
and irresponsibility?

“…Our
economy is and has always been subject to fluctuations, sometimes very extreme
fluctuations. Throughout the past century, market forces have periodically
placed significant pressures on public pension systems. The repercussions of
underfunding those pension systems in such an environment have been
well-documented and were well-known when the General Assembly enacted the
provisions of the Pension Code which Public Act 98-599 now seeks to change (20).

“The General Assembly had
available to it all the information it needed to estimate the long-term costs
of those provisions, including the costs of annual annuity increases, and the
provisions have operated as designed… (20).

“The General Assembly understood
that the provisions would be subject to the pension protection clause. In
addition, the law was clear that the promised benefits would therefore have to
be paid, and that the responsibility for providing the State’s share of the
necessary funding fell squarely on the legislature’s shoulders. Accordingly,
the funding problems which developed were entirely foreseeable (20).

“The General Assembly may find
itself in crisis, but it is a crisis which other public pension systems managed
to avoid and, as reflected in the SEC order, it is a crisis for which the
General Assembly itself is largely responsible (20).

“Moreover, no possible claim can
be made that no less drastic measures were available
when balancing pension obligations with other State expenditures became
problematic. One alternative, identified at the hearing on Public Act 98-599,
would have been to adopt a new schedule for amortizing the unfunded
liabilities. The General Assembly could also have sought additional tax
revenue. While it did pass a temporary income tax increase, it allowed the
increased rate to lapse to a lower rate even as pension funding was being
debated and litigated (20).

“That the State did not select the least drastic
means of addressing its financial difficulties is reinforced by the legislative
history. As noted earlier in this opinion, the chief sponsor of the legislation
stated candidly that other alternatives were available. Public Act 98-599 was
in no sense a last resort. Rather, it was an expedient to break a political
stalemate (20).

“The United States Supreme Court has made clear that the United States Constitution ‘bar[s] Government from
forcing some people alone to bear publicburdens
which, in all fairness and justice, should be borne by the public as a whole
[citations].’
(Internal quotation marks omitted.) United
States v. Winstar Corp., 518 U.S. 839, 883 (1996). Through Public Act 98-599, however, the General Assembly
addressed the financial challenges facing our State by doing just that. It made
no effort to distribute the burdens evenly among Illinoisans. It did not even
attempt to distribute the burdens evenly among those with whom it has
contractual relationships…” (20).

“Adherence to constitutional
requirements often requires significant sacrifice, but our survival as a society depends on it. The United States Supreme
Court made the point powerfully nearly a century and a half ago when it struck
down as unconstitutional President Lincoln’s use of executive authority to
suspend the writ of habeas corpus during the Civil War, a period of emergency
that, by any measure, eclipsed the one facing our General Assembly
today. In rejecting the government’s argument that wartime concerns justified
the curtailment of the constitutional protections, the Supreme Court employed
language which seems appropriate to this case:

“‘Time has proven
the discernment of our ancestors; for even these provisions, expressed in such
plain English words, that it would seem the ingenuity of man could not evade
them, are now, after the lapse of more than seventy years, sought to be
avoided. Those great and good men foresaw that troublous times would arise,
when rulers and people would become restive under restraint, and seek by sharp
and decisive measures to accomplish ends deemed just and proper; and that the
principles of constitutional liberty would be in peril, unless established by
irrepealable law. The history of the world had taught them that what was done
in the past might be attempted in the future. The Constitution *** is a law for
rulers and people, equally in war and in peace, and covers with the shield of
its protection all classes of men, at all times, and under all circumstances.
No doctrine, involving more pernicious consequences, was ever invented by the
wit of man than that any of its provisions can be suspended during any of the
great exigencies of government. Such a doctrine leads directly to anarchy or
despotism ***.’ (Emphasis in original.) Ex parte Milligan, 71 U.S. 2, 120-21
(1866)” (25-26) (In the Supreme Court of the State of Illinois, (Docket No. 118585 In re Pension Reform Litigation (Doris Heaton et al., Appellees v. Pat Quinn, Governor, State of Illinois, et al., Appellants), Opinion filed May8, 2015).

6 comments:

"You can take the ‘separation of powers’ doctrine only so far. It does not give the State of Illinois the right to defraud people. The SEC previously got involved and has established the precedent of fraud. The underfunding of pension plans in the State of Illinois is a fraud resulting from a collusion between the American Academy of Actuaries and the State of Illinois. The State of Illinois established the procedures that ‘cooked the books’ and Members of the American Academy of Actuaries certified them as being okay. You don’t punish a small segment of the state population (i.e. public sector employees) for the misdeeds of the entire State..."

The Securities and Exchange Commission today charged the State of Illinois with securities fraud for misleading municipal bond investors about the state’s approach to funding its pension obligations.

An SEC investigation revealed that Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. Illinois failed to disclose that its statutory plan significantly underfunded the state’s pension obligations and increased the risk to its overall financial condition. The state also misled investors about the effect of changes to its statutory plan.

Illinois, which implemented a number of remedial actions and issued corrective disclosures beginning in 2009, agreed to settle the SEC’s charges.

“Municipal investors are no less entitled to truthful risk disclosures than other investors,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. “Time after time, Illinois failed to inform its bond investors about the risk to its financial condition posed by the structural underfunding of its pension system.”

Elaine Greenberg, Chief of the SEC’s Municipal Securities and Public Pensions Unit, added, “Regardless of the funding methodology they choose, municipal issuers must provide accurate and complete pension disclosures including the effects of material changes to their pension plans. Public pension disclosure by municipal issuers continues to be a top priority of the unit.”

According to the SEC’s order instituting settled administrative proceedings against Illinois, the state established a 50-year pension contribution schedule in the Illinois Pension Funding Act that was enacted in 1994. The schedule proved insufficient to cover both the cost of benefits accrued in a current year and a payment to amortize the plans’ unfunded actuarial liability. The statutory plan structurally underfunded the state’s pension obligations and backloaded the majority of pension contributions far into the future. This structure imposed significant stress on the pension systems and the state’s ability to meet its competing obligations – a condition that worsened over time.

The SEC’s order finds that Illinois misled investors about the effect of changes to its funding plan, particularly pension holidays enacted in 2005. Although the state disclosed the pension holidays and other legislative amendments to the plan, Illinois did not disclose the effect of those changes on the contribution schedule and its ability to meet its pension obligations. The state’s misleading disclosures resulted from various institutional failures. As a result, Illinois lacked proper mechanisms to identify and evaluate relevant information about its pension systems into its disclosures. For example, Illinois had not adopted or implemented sufficient controls, policies, or procedures to ensure that material information about the state’s pension plan was assembled and communicated to individuals responsible for bond disclosures. The state also did not adequately train personnel involved in the disclosure process or retain disclosure counsel.

According to the SEC’s order, Illinois took multiple steps beginning in 2009 to correct process deficiencies and enhance its pension disclosures. The state issued significantly improved disclosures in the pension section of its bond offering documents, retained disclosure counsel, and instituted written policies and procedures as well as implemented disclosure controls and training programs. The state designated a disclosure committee to assemble and evaluate pension disclosures. In reaching a settlement, the Commission considered these and other remedial acts by Illinois and its cooperation with SEC staff during the investigation. Without admitting or denying the findings, Illinois consented to the SEC’s order to cease and desist from committing or causing any violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933.

The SEC’s investigation was conducted by Peter K. M. Chan along with Paul M. G. Helms in the Chicago Regional Office and Eric A. Celauro and Sally J. Hewitt in the Municipal Securities and Public Pensions Unit. They were assisted by other specialists in the unit including Joseph O. Chimienti, Creighton Papier, and Jonathan Wilcox.

This enforcement action marks the second time that the SEC has charged a state with violating federal securities laws in their public pension disclosures. The SEC charged New Jersey in 2010 with misleading municipal bond investors about its underfunding of the state’s two largest pension plans. Additional information about the SEC’s initiatives in the area of municipal securities can be found in its Report on the Municipal Securities Market released last year.

In its June 30, 2015 actuarial valuation report for the Teachers’ Retirement System (TRS), Buck Consultants refers to its determination of the Illinois statutory contribution requirement as Illinois Math. On page 108 of the June 30, 2015 Actuarial Valuation Report of the Teachers’ Retirement System of the State of Illinois: “Illinois Math. The term given to the various schemes in the Illinois Pension Code designed to systematically underfund public employee retirement systems in the state of Illinois …”. The Securities and Exchange Commission (SEC) had previously called this a fraud.

For participants in the underfunded Chicago Teachers’ Pension Fund, its pension benefits will be their primary retirement investment. It does not bode well for Chicago teachers when the municipal bonds of the Chicago Public Schools (CPS) are also investments with a financial junk status. And to make matters worse, the contribution requirements for CPS are calculated using Illinois Math. For TRS, Buck Consultants wants to replace this junkyard math with its own Actuarial Math 2.0.

Fellow educators. When are we going to start demonstrating in numbers in front of legislatord offices in front of their homes just like they did to remove the chief of police in Chicago .....it's time that we show our strength and not our weakness .I am sick and tired of being lied to.

Teacher/Poet/Musician

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Persona

"I want everything to be explained to me or nothing. And reason is impotent when it hears this cry from the heart. The mind aroused by this insistence seeks and finds nothing but contradiction and nonsense" —Albert Camus (1913-1960).